A Star Is Born
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the severest economic depression in memory.3 The Great Depression had eroded faith in the ability of markets to equilibrate supply and demand and to sustain economic activities at a high enough level of employment in the industrial countries. Fears of secular stagnation from a closing of the economic frontier, from flagging innovation, and from declining population growth came to be debated (Fogel 2005; Hansen 1939). There was greater receptivity to Keynesianism, and the Depression certainly did nothing to undermine the attractions of socialism.4 The war effort elaborated and entrenched planning and controls everywhere, vastly expanding the role of the state. An increasingly self-confident Soviet Union, which was able to draw much of Eastern Europe into its orbit, and the coming of a communist regime in China in 1949 lent additional support to the case for detailed planning undergirded by state ownership of substantial segments of the economy. This recovery, particularly in Europe and later also in China and Japan, proceeded under strong state tutelage. The hand of the state plucked most of the economic strings, and state entities were responsible for half or more of total production in mixed economies and up to 90 percent in communist countries. Much to the surprise of the pessimists, post–World War II reconstruction progressed smoothly, and the rebound in economic activity was remarkably swift, with communist countries showing production gains as significant if not greater than those of the predominantly capitalist economies. The great industrial resurgence, which gathered momentum in the 1950s, was state directed, disciplined by targets, and frequently led by the public sector. It tended to be autarchic or quasi-mercantilist and was buttressed by a multitude of import restrictions. The retreat from the first globalization, which began in 1914,5 entered a new phase as capitalist and socialist economies 3. When one looks at the Great Depression using time-series data on per capita income growth, it is remarkable how quickly even the most damaging shocks fade out. The great influenza epidemic is another example, and very likely the most recent shocks will also be smoothed over fairly rapidly. 4. However, the reflationary measures introduced from 1933 by President Franklin D. Roosevelt through the New Deal were rooted in his effort to help the “forgotten man”—the “one-third of the nation ill housed, ill clad, ill nourished.” John Maynard Keynes’s ideas did not motivate the first New Deal. In fact, after their first meeting in 1934, Roosevelt was impressed by Keynes but baffled by his economics (Cord 2007, Stein 1969). 5. Scattered evidence of global integration as a result of advances in shipbuilding and the growth of trade begins accumulating from the 15th century onward (on “archaic” globalization, see Bayly 2002). One scholar maintains that the Roman Empire was a major globalizing force because it expanded markets; imposed peace; and integrated culture, technologies, and ideas (Hitchner 2008).
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